BoE maintains cautious guidance with dovish undertones, says BofA

BofA Global research on Thursday viewed the Bank of England’s latest decision as having dovish undertones, citing the cautious 6-3 vote split and gradual guidance, which signal the likelihood of rate cuts starting in February 2025.

BofA also highlighted the BoE’s shift in labor market assessment from "relatively tight" to "broadly balanced," reflecting a more tempered outlook. 

Despite recent increases in inflation and pay growth, the BoE's guidance suggests a gradual path towards rate reductions.

BofA expects the next cut will occur in February, with rates gradually declining to 3.50% by early 2026.

Market pricing for rate cuts softened following the Bank of England’s decision, though not as much as expected based on the dovish tone of the meeting minutes, according to BofA.

The central bank reiterated its careful approach, highlighting the necessity for a gradual policy adjustment. This decision reflects concerns over persistent domestic inflation and uncertainties surrounding economic growth and inflation projections.

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Source: Investing.com